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5 Reasons Nokia's N8 Won't Beat the iPhone 4

The new smartphone may help boost Nokia's market share, but will it move the company to the top of the heap?

Nokia's (NYSE: NOK) new N8 smartphone has impressive specifications and is perhaps the best smartphone the Finnish mobile phone maker has launched yet. Its powerful camera features, Symbian 3 OS, and huge storage capacity (up to 48GB via a MicroSD card slot) are certain to attract early adopters. But can it be a threat to Apple's (Nasdaq: AAPL)iPhone 4?

Analysts don't think so. Though the N8 is "a clear improvement" over previous Nokia offerings, Gartner analyst Carolina Milanesi believes that the N8 won't wipe the floor with the competition.

According to independent technology analyst Per Lindberg, the N8 is "certainly a step in the right direction (as) it's much more multimedia" than previous Nokia smartphones, but "whether it will move Nokia's market share upwards is more debatable."

Ovum's Tony Cripps also thinks the N8 is far from being industry changing: "I don't think Nokia would position the N8 as a revolutionary device."

There are five reasons the N8 won't be able to beat the iPhone 4 or the latest smartphones from rivals such as Motorola, HTC, or Samsung.

1. Weak processor. Nokia claims the N8 has a "lightning-fast processor" and is capable of rendering graphics and playing videos and games "smoother and faster" than previous Nokia smartphones.

Technically, Nokia is right, because its last smartphone, the N97, ran on a 434MHz processor, while the N8 runs at 680MHz. However, to call the N8's processor "lightning-fast" is a misnomer. The iPhone 4, HTC's Evo 4G, Motorola's Droid 2, and Samsung's Galaxy S all run on a more powerful 1GHz processor. Comparing the N8 processor to these models is like comparing an Oldsmobile to a Lamborghini.

2. Low memory. For a top-end smartphone, the N8 has a low memory capacity. The device has only 256MB of SDRAM, while its high-end rivals boast twice as much. If you run too many applications at once, the N8 will quickly succumb to the pressure.

3. Symbian OS. Although Symbian OS is N8's strength, it is also its biggest weakness.

According to Gartner, even though Symbian OS will have controlled 40.1% of the smartphone market in 2010, it will witness a sharp drop to 30.2% by 2014. The only OS expected to gain ground over the period is Google's (Nasdaq: GOOG) Android platform, whose market share will surge from 17.7% in 2010 to 29.6% in 2014. But even Research In Motion, Apple, and Microsoft are expected to lose less OS share than Nokia will.

According to CCS Insight analyst Ben Wood, Nokia's new smartphones were "critical" in the fight to grab market share, but the Symbian software, despite refinements aimed at making it easier for developers to write apps for the phones, was "not positioned to challenge the iPhone."

"Nobody doubts Nokia's credentials. It has the market share but has lost the mindshare," Wood said. "Nokia, along with all the other mobile manufacturers, has been wrongfooted by Apple and Google, and it will be a tough road to recovery."

There's nothing to set Symbian apart from its competition, and that's contributing to its sharp decline. Symbian devices are also unable to update beyond the core system software with which they shipped. Updates are an essential part of how smartphones work -- not only to offer bug fixes, but also to introduce new features and develop brand equity and loyal users. Android, BlackBerry OS, and Apple's iOS all offer upgrade paths beyond core system updates. For instance, users of the two-year-old 3G iPhone can upgrade their device from iOS 2.0 to iOS 4.1. Likewise, anyone who got a Motorola Droid last year can switch from Android 2.0 to Android 2.2. But Nokia has historically not supported a commercial upgrade path for older Symbian-based devices.

4. Internal battery. Like the iPhone, the N8's battery is sealed inside the unit. Nokia has recommended that N8 users not try replacing the battery. "It can easily be replaced at a Nokia service center," the company said in a blog post.

5. Price. The N8 will cost $549 in the United States. Meanwhile, you can get a 32GB iPhone 4 for $299 by signing a two-year contract with AT&T. Other top-end smartphones -- including the BlackBerry Torch 9800, Droid 2, Evo 4G, and Samsung Galaxy S -- are available at subsidized prices between $149 and $249 when you sign with a provider.

Not surprisingly, some observers believe that Nokia's insistence on selling its devices unsubsidized and without operator input represents an arrogance on the company's part that has become its pitfall.

ConclusionThe N8 is no iPhone killer. It may also have a hard time competing with other leading smartphones. But analysts suggest that the N8 represents a good start from a company that's always struggled in the high-margin smartphone segment and could herald the start of a good fight toward smartphone leadership.

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